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Once you begin the loan modification application process, your lender will typically want you to complete a slew of paperwork as part of the process to apply for a loan modification. One document almost all lenders will ask for is a "hardship letter" which details your financial circumstances, your reasons for needing a loan modification, and any other information relevant to your loan modification application.
So, what should go in a hardship letter? What should you leave out? Although there's no magic formula for writing a great hardship letter, there are some things which you should be aware of when crafting your letter to help boost your chances of success.
1) Remember your audience: Your letter will be read by one of a ton of "loss mitigation specialists" who have the mind-numbing job of reading countless letters from the thousands and thousands of people just like you who are caught up in this financial disaster. Put yourself in their shoes and think what you'd like to see. Some key things here are to be polite, professional, and detailed...but also to-the-point. A one or at maximum two page letter should be plenty to describe your situation.
It should go without saying that copying a hardship letter from the internet (or another source) is a bad idea: though you can get ideas from other people's letters, remember that the person reading your letter will likely have seen all the "popular" letters which are passed around on the web. In short, make your letter specific to your situation.
2) Include the important details: Your lender may have a specific set of topics they want you to cover, so make sure you carefully read their list and include all the details they ask for. It may also be a good idea to include the following:
- Your loan number
- Specific reason(s) for your hardship, such as: ARM reset, unemployment, illness, death of spouse/co-borrower, job relocation, business failure, military duty, medical bills, divorce, incarceration, marital separation.
- Your current payment status, and how many months you're behind (or if you're about to fall behind)
- In the event of ARM reset, your previous payment amount and your new payment amount.
3) Leave out the emotion: I know it can be very hard to do, but it's important that your letter be emotionally neutral. This can take some real effort, and may require you to "put the letter down" and come back to review it a couple of times. Remember that if you "turn off" your reader you may do real harm to your chances...so try hard to come across in your writing as calm and collected, but serious.
4) Though it may sometimes be difficult to be polite, be sure to thank the reader for taking the time to review your circumstances. Also include contact information for yourself and/or your spouse, such as phone number, mailing addresses, etc. Though you'd think that lenders already have this information, it can't hurt to make sure they have it in front of them again.
Armed with this information and your lender's guidelines, you're ready to start writing an excellent hardship letter! If you're tired of fighting with your bank, or if your bank has turned you down despite your compelling hardship letter, you might want to consider getting professional mortgage modification assistance from a no-obligation professional.